Analytics and the Modern Casino: A Game Changer

A study in SaskGaming's slot floor optimization

"A dollar won is twice as sweet as a dollar earned," said Paul Newman in The Color of Money. But with growing competition for the entertainment dollar, winning over customers has never been more challenging.

When it comes to slot floor planning, bad decisions can mean significant losses in customer loyalty and potential revenue. According to the Canadian Gaming Association, legalized gaming has nearly tripled in size since 1995, from $6.4 billion in gaming win to about $15.1 billion in 2010. Moreover, as other sources estimate up to 85% of casino revenue stems from slot operations, this is considered a vital component of the business.

When deciding which games to offer or replace, casinos may look at historic results and reason that games which were popular in the past will continue to be so in the future. Therein lies a missed opportunity. With mountains of invaluable customer data available, a growing number of casinos around the world are turning to advanced analytics to assist with slot floor planning—and it’s proving to be a winning bet.
Case Study: SaskGaming's slot floor optimization

SaskGaming has enjoyed positive revenue growth since opening Casino Regina in 1996 and Casino Moose Jaw in 2002. However, like others in the industry, its initial period of double digit growth eventually plateaued as it reached a more mature stage in its market cycle. Customer demand for slot machine play in particular seemed to be saturated. In the fall of 2011, this thought had been on the mind of Elliott Daradich, SaskGaming’s Director of Slots for nearly 17 years. On board since the casino's inception, Elliott witnessed the development of the business into an increasingly dynamic environment. With so many changes taking place at once, he wondered: How can one plan the right mix of gaming choices, denominations, and machine placements to optimize customer interest?

To answer this, SaskGaming paired with SAS Analytics to discuss options to assess and refine SaskGaming’s data needs to improve its long- term slot business planning process. Project heads from each organization adopted a multi-phased team approach that began in summer 2012 with a detailed test, or 'proof of concept'.

SaskGaming determined its current business needs were beyond what had been envisioned when its slot databases were originally created. Therefore, the first step in the process was assessing and cleaning the available data to enable a detailed categorization of relevant information to gain insights into slot performance to date.

The data needed to be reviewed and revised for consistency to allow the history of similar games to be tracked. This was a key challenge of the initiative because results of analysis can only be as good as the information that gets analyzed.

“It took a lot longer than we anticipated; in the end there were five iterations,” recalls David Koch, Analytics Specialist with SaskGaming.

Next, the team used this information to provide a best-case predictive forecast into how each game would perform in the year to come. In the process, it became possible to begin collecting insight into leading predictors of guest preference that would optimize profitability while supporting the integrity of fair and random play.

“Our databases lacked details about the attributes of individual games and machines,” explains Daradich, adding, “Now that we’ve seen what can be learned from this kind of information, we plan to redevelop and augment our data capture with an eye toward future analysis capabilities.”

Leveraging categorization and each game vendor’s market research, it became possible to isolate a surrogate to help it analyze options for new game purchases. Moving forward, the technology will allow SaskGaming to predict the potential impact of changes on slot performance based ‘what if ’ scenarios. This provides much greater forecasting power than the traditional approach to decision making, which was limited to reports based on one variable, looking exclusively at historical data.

Finally, advanced optimization was utilized to determine the best approach to future business, considering factors such as physical space and budget. This information will help SaskGaming optimize its slot purchase options, including the analysis of which machines to replace and when to replace them, while also ensuring player experience is not hampered through down-time.

“In the end, the solutions offered by the test case promise a new perspective,” says Daradich. “Better yet, we were there to take part and see it happen. Every Friday as we met as a team, we considered the results and next steps together. It gave me the opportunity to become comfortable with, and have confidence in, the outcome.”

“To me, what’s different about this approach is no one is trying to isolate the one magic variable that matters above all else to customers and will make the business thrive for years to come,” adds Koch. “Rather, we’re simply identifying those games which customers find appealing even if we don’t know why. This solution has helped us to immediately improve our understanding of customer preferences. As our databases become richer with new game and machine attributes, we’ll also have stronger predictors of long-term performance, allowing us to make better decisions in the future.

Power in SaskGaming's hands

Competition in the entertainment market can be fierce. SaskGaming recognizes that with more competition for discretionary entertainment spending by customers, it needs to offer guests an entertainment experience that exceeds their expectations. As such, being able to make empirically sound decisions about which slots will best appeal to customers is more important than ever. The analytics solution enables users to move seamlessly through the entire process, from data collection to forecasting, prescriptive optimization, and reporting.

“To have the power to reasonably forecast future results and do those ‘what if ’scenarios convenience lets us make decisions about the timing and nature of machine replacements so as to achieve the most desirable business outcomes,” said Daradich.

An example for all

Using analytics, SaskGaming now has a new perspective on its games data, allowing the casino to use analytics to offer the right games, in the right locations to attract loyal and valuable customers. SaskGaming looks forward to considering the potential for slot floor analytics to improve its analysis capacity in other areas of its operations.

With flexible analytics solutions that can be implemented by any department at a casino from food and beverage to entertainment, it is easy for casinos to take a ‘sky’s the limit’ approach using analytics to transform the business planning process.

Craig Carothers is SAS's Canada Principal Demand Intelligence; Ivan Oliveira is SAS Director and Advanced Analytics Research and Development; and Emmanuel Pacheco is Gaming, Hospitality and Entertainment Sales Lead for SAS Canada. For more on SAS Canada, contact Andrew Bowden, SAS Canada Marketing Specialist, at Andrew.Bowden@sas.com.